Why Apple Is Allergic to Dividends

CUPERTINO, Calif. (TheStreet) -- Apple(AAPL) is now one of a shrinking number of tech heavyweights avoiding dividend payments despite recent calls from shareholders and analysts to rethink its strategy.

Even networking giant Cisco(CSCO) recently succumbed to pressure from shareholders and is planning to make a dividend payment next year. Microsoft(MSFT), which reversed its dividend stance in 2003, announced a 23% dividend hike on Wednesday.

So why is Apple allergic to dividends?

Apple sits astride a vast haul of cash -- almost $46 billion at the last count. It stopped paying dividends in 1995, preferring to focus on growth at a time of stiff competition from the likes of Microsoft. Fast forward 15 years, though, and Apple has a market cap of $261.5 billion, compared to Microsoft's $211 billion. Steve Jobs and his ever-growing array of gadgets have also carved out a unique niche in the public consciousness, with Apple enjoying phenomenal brand loyalty.

Even from this position of strength, though, there are no signs of an Apple dividend.

Earlier this year, at Apple's annual shareholder meeting, Steve Jobs said that he prefers holding onto the company's cash hoard for potential acquisitions and "bold" investments.

"We know if we need to acquire something, a piece of the puzzle to make something big and bold, we can write a check for it and not borrow a lot of money and put our whole company at risk," he said. "The cash in the bank gives us tremendous security and flexibility."

Some analysts agree, adding that Apple spending money on a big tech buy would be a smart way to bolster the company's reach. "They could easily afford a dividend at any time, however I would rather see them make an aggressive M&A move," Joel Achramowicz, senior vice president of research at investment bank Blaylock Robert Van, told TheStreet.

A big acquisition could significantly bolster Apple's enterprise presence, according to Achramowicz, who suggested Netflix(NFLX) as an attractive target on the strength of is strong consumer distribution platform.